Cochrane Steel Products (Pty) Ltd v M-Systems Group (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Nicholls J
• Judgment Date: 29 October 2014
• Docket Number: 39605/13
• Court: Gauteng Local Division, Johannesburg
• Hearing Date: 20 August 2014
• Citation: 2014 JDR 2724 (GJ)

Nicholls J:

Introduction

[1]

The applicant is a company which conducts business as a manufacturer of security fencing and related products. The respondent is a company which competes with the applicant in the industry of perimeter security and fencing. The applicant's complaint is that the respondent uses the applicant's trademark 'ClearVu' for its internet advertising.

[2]

The applicant claims that in 2008 it developed and successfully pioneered a type of fencing which allows optimal visibility but which is, for all intents and purposes, impenetrable. The applicant's brand name for this fencing is 'ClearVu'. It is allegedly well known throughout South Africa and represents business worth hundreds of millions of rands. In 2012 the respondent commenced the manufacture and sale of a similar product using the name 'M-Secure'.

[3]

The applicant seeks a final interdict restraining the respondent from using the trademark 'ClearVu' as a keyword in the Google AdWords System, or as a metatag. There is no trade mark registered over 'ClearVu' and accordingly the relief is based not on a statutory infringement, but on the common law interdict of unlawful competition. In argument the applicant contended for an interim interdict pending the registration of the trade mark in the alternative. The respondent denies that it is using the word 'ClearVu' as a metatag but admits that it bids on the word on Google AdWords, which it says is a lawful and common business practice. In light of this concession, the case was argued only on the issue of keywords and the cause of action on metatags was seemingly abandoned.

To understand the issues in this case an explanation of how the Google AdWords Systems operates is necessary.

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Google AdWords System

[4]

When an internet user performs a search on the basis of one or more words on the Google search engine, it will display the results which best correspond to that word in decreasing order of relevance. These are the so-called 'natural' or 'organic' results of the search. The second type of link is a 'sponsored link'. This constitutes a form of advertising where a commercial entity has paid for their advertisement to appear once certain words, known as 'keywords', are entered into the search engine.

[5]

The Google AdWords System grew out of Google's recognition of the importance of the internet as a marketing tool and how lucratively this could be exploited. Google therefore 'sells' advertising space on the top of the page (or the right hand side of the page), above the natural results. Any commercial entity, by means of the reservation of one or more keywords, can obtain an advertising link to its site when an internet user enters one or more of the keywords into a search request. Google refines the system from time to time but the essential elements remain unchanged.

[6]

The system enables an entity to pay a fee to display an advertisement in these sections. This advertising space is highly sought after. The advertisement is triggered by the use of one or more keywords in a given search. The ranking of the advertisements, an all important aspect, is determined by various factors but primarily a price-per-click. This is when an internet user 'clicks' on the advertisement to take him through to the advertiser's website. An advertiser can, at any time, improve its ranking by fixing a higher maximum price-per-click for a keyword than another commercial entity who has nominated the same keyword.

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[7]

The fee is calculated primarily on the basis of a maximum price-per-click which the advertiser has agreed to pay and the number of times that the link was clicked on by internet users. The price-per-click is negotiated for each keyword exploited by an advertiser. There might be several keywords, each having a different price tag for a resulting "click-through" to the advertiser's site.

[8]

The applicant's complaint is that a search for 'ClearVu' will result in the respondent's advertisement being displayed because it has selected 'ClearVu' as a keyword. The applicant contends that whenever an internet user searches via Google for 'ClearVu' it is because the internet user is looking for the applicant's product. Instead, the respondent's advertisement (for its M-Secure product) pops up, prominent in relation to the search results.

[9]

Moreover, the applicant alleges in its supplementary affidavit that the applicant's trade mark 'ClearVu' appears in the text of the respondent's advertisement. This allegedly reinforces the representation that the respondent's business and products are connected or associated with the applicant and its 'ClearVu' product. The applicant asserts that this is nothing other than a competitive act calculated to confuse or deceive customers and designed to take business away from the applicant and divert it to the respondent.

[10]

To add insult to injury, to ensure that the applicant's advertisement has a higher ranking and appears in a preferable position to that of the respondent, the applicant has to raise the price-per-click for the use of its own brand name. Since this pricing works on a basis whereby the applicant does not know what the respondents have tendered for a 'click-through' resulting from its advertisement, the applicant is, it asserts, doubly prejudiced. It has to pay more than it would have to in order to advertise its own brand.

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[11]

The respondent admits that it bids on the words 'clearvu', 'clear vu' and 'clear-vu' in the Google AdWords System – this is the reason for the appearance of its M-Secure advertisement in the search result of 'ClearVu'. It denies that this conduct amounts to the use of the applicant's 'ClearVu' mark as a trademark or that this will result in customers being confused and deceived into thinking the respondent's M-Secure product is connected with the applicant's 'ClearVu' product. It also denies that every instance of a search for a keyword will lead to the display of the related advertisement. This, it says, will depend on the number of advertisements related to the keyword and the respective ranking of the keywords. The respondent further denies that the Google AdWords affect the ranking of natural search results. In respect of the allegation that 'ClearVu' appears in the text of the respondent's advertisement, this is emphatically denied. This so called 'visual use' will be dealt with later in the judgment.

[12]

The applicant applied for the registration of 'ClearVu' as a trade mark in terms of the Trade Marks Act 194 of 1993 ("the Act") during 2010. The respondents were informed by the applicants' attorneys that once the mark was registered, its use would constitute another ground of illegality, namely a statutory trade mark infringement. The Registrar accepted the application for registration but a few days before the expiry of the statutory three month period for filing opposition to the registration, the respondent notified the Registrar that it wished to oppose the registration. As a result the trademark is currently not registered.

[13]

The applicant attributes a sinister motive to the respondent. It asserts that this conduct is abusive as the respondent's objection is ill-founded and designed merely to prevent the applicant from securing registered protection in order to avoid another statutory ground of illegality. Nonetheless, the applicant for the purposes of this application, relies on the infringement of its common

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law rights which it states resides in its reputation, and is a constituent of its goodwill. The Applicant is also the owner of the internet domains and .

[14]

Before dealing with the applicant's causes of action, its allegation of visual use by the respondent must be addressed. Visual use consists, not only of the use of a trade mark as a keyword by a competitor, but also using the trade mark in the text of the competitor's advertisement.

Visual use

[15]

Until 11 April 2014 the applicant's case was based entirely on the use of the keyword 'ClearVu' as set out above. On 11 April 2014 the applicant filed a fourth affidavit seeking to introduce evidence to the effect that on 19 March 2014 it became aware that the respondent was using 'ClearVu' in the text of its Google advertisements. In support of this, the applicant attached what it claimed was an example of the visual use of 'ClearVu' in the respondent's advertising text. No explanation is proffered as to how this evidence was obtained. The advertisement referred to is:

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[16]

The respondent denies that it uses 'ClearVu' as text in its advertisements. It states that there is no evidence that it is responsible for this visual use as anyone can manufacture a search result simply by bidding on a Google Adword and crafting an advertisement that will appear in the results. Apart from alleging gross unfairness if the evidence were introduced at this stage, the respondent avers that the introduction of this evidence amounts to the introduction of an entirely new cause of action, based on facts which were neither pleaded nor evidenced in the founding affidavit.

[17]

Ordinarily only three sets of affidavits are permitted in motion court proceedings – the founding affidavit, the answering affidavit and the replying affidavit. However, a court has a discretion to admit more than three affidavits subject to considerations of fairness and justice and in the absence of prejudice to other parties. The applicant is obliged to show circumstances warranting the admission of further affidavits. [1] It is not sufficient to set out bald allegations. [2] Counsel for the respondent correctly states that the applicant has set out very few facts to support its claims of "visual use". It is not stated what search engine...